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Inflation Stays Steady: A Glimmer of Hope? \ud83c\udf1f<\/h3>\n
Last Friday\u2019s Personal Consumption Expenditures (PCE) report showed that consumer inflation rose by .3%, which held the annualized rate stable at 2.7%. When you strip out volatile food and energy process, the Core rate increased by .249%, which lowered the annualized rate of the Federal Reserve\u2019s favorite gauge of consumer inflation from 2.813 down to 2.75%.<\/strong> While we still are \u00be% above the Fed\u2019s target rate of 2%, we have made significant progress toward the goal in recent months.<\/strong><\/p>\n It was also reported that consumer spending increased by .2% in the month of April, which was lower than anticipated, and much lower than the .8% reading from the month prior. In addition, the savings rate remained at 3.6%, which is the lowest level since November 2022. Both of these reports indicate that the consumer may be becoming financially exhausted and fatigued in the current environment of high inflation and high interest rates. This theory is also noticeable by looking at credit card delinquency rates, which have moved sharply higher in recent months.<\/strong><\/p>\n It is now June, which means that the Federal Reserve will now be reinvesting an additional $35 billion a month into 10-Year Treasury Notes.<\/strong> This is the first step in the Fed\u2019s plan to slow the pace of Quantitative Tightening, which will help support lower mortgage interest rates in the months ahead. Hopefully, this will provide the extra power needed for yields to break beneath a trading channel that has been in place since late 2023. If that happens, we could start to see mortgage rates for a downward trend, just in time for the summer purchase season.<\/strong><\/p>\n <\/p>\n Given the strong support level currently holding back rate improvements, now might be a prudent time to lock in rates.<\/em><\/p>\n The US federal debt has now exceeded $34.5 trillion, marking a more than 50% increase since 2019. This surge in government spending creates a misleading appearance of economic strength by injecting borrowed money into the economy. However, it has also driven the rapid inflation causing significant hardship for the lower and middle classes, who are less equipped to handle rising consumer prices. The only viable solutions to curb inflation are for the government to reduce spending or increase taxes, both of which face considerable political resistance.<\/p>\n Last week\u2019s CPI report indicated a 0.3% inflation rate for April, which was below the anticipated 0.4%. While this lower-than-expected rate helped ease mortgage interest rates slightly, a 0.3% monthly increase is still above the average 0.167% required to achieve the Fed\u2019s 2% annual inflation target. This report suggests no immediate need to raise rates further, but it also doesn\u2019t justify any near-term rate cuts. We still hope to see 2-3 rate cuts in 2023, but this hinges on continued slowing in price growth in the upcoming months.<\/p>\n After three weeks of declining rates, yields on the 10-Year Treasury Note have hit a strong support level that has held since last December. Given the strength of this support, meaningful improvements in mortgage rates are unlikely until yields on the 10-Year Treasury break below this level. The next significant inflation report, the Personal Consumption Expenditure (PCE) report, will be released on May 31st. As the Fed\u2019s preferred measure of inflation, this report will significantly influence the long-term direction of mortgage rates. However, with the ongoing headwinds of massive government deficit spending, an acceptable pace of price growth seems unlikely.<\/p>\n <\/p>\n The upcoming CPI report poses considerable risk for floating mortgage rates. Only opt to float if you\u2019re prepared to weather potential rate increases post-Wednesday\u2019s release.<\/em><\/p>\n Consumer debt in the US continues its upward trajectory, hitting record highs<\/strong>, fueled in part by homeowners tapping into home equity loans for various purposes. With interest rates at elevated levels, the cost of servicing this debt has soared, raising concerns about financial strain, especially if wage growth decelerates. Economists are puzzled by consumers\u2019 continued aggressive spending habits. My belief is that the extra cash is a product of wages continue to rise while so many people are locked into low mortgage payments.<\/strong><\/p>\n Wednesday brings the much-anticipated Consumer Price Index (CPI) report, offering insights into consumer inflation. Investors are bracing for potential market shifts, with mortgage rates likely to hold steady in the lead-up to the release. Optimism about declining inflation in recent weeks has tempered rate movements. However, an unexpected inflation uptick could drive rates higher<\/strong>, while confirmation of slowing inflation could signal a downward trajectory for rates.<\/p>\n The Biden Administration unveiled significant tariffs on Chinese imports, particularly targeting green energy products. This move aims to bolster US companies unable to match China\u2019s pricing, affecting electric vehicle and solar equipment costs. Homeowners considering solar installations may want to act promptly before potential price increases take effect.<\/p>\n <\/p>\n After a nice week, mortgage rates are starting today above their 200-day moving average. If this holds, we can expect to see rates improve in the near term. However, floating remains risky. Do so only if you are willing to take the chance of a reversal in this downward move.<\/em><\/p>\n Last week\u2019s Bureau of Labor Statistics (BLS) report delivered a jaw-dropping twist that left economists doing double takes. Job creations for April fell short of expectations, sending ripples of excitement through the Federal Reserve.<\/strong> With only 175,000 jobs on the books against the anticipated 243,000, the stage is set for potential rate cuts in 2024.<\/strong><\/p>\n Plus, the Unemployment Rate taking a leap from 3.8% to 3.9% has folks crossing fingers that higher interest rates might just cool down the red-hot labor market. Are we in for some rate cut action?<\/strong> Stay tuned!<\/p>\n The Federal Reserve’s latest move is making waves in the bond market! While interest rates stayed put last week, the Fed’s announcement to ease up on their balance sheet reduction plan is causing a stir.<\/strong> How, you ask? By injecting extra liquidity into the bond market, the Fed aims to tackle the government’s deficit spending head-on. And here’s the kicker: this liquidity boost is poised to trickle down to the mortgage bond market, ushering in potential drops in mortgage interest rates down the line.<\/strong> Hang tight, mortgage enthusiasts, because smoother sailing might just be on the horizon!<\/p>\n Economic rollercoaster, anyone? While the US economy hasn’t plunged into a full-blown recession, whispers of a “rolling recession” are keeping us all on our toes. Picture this: after a wild ride, the manufacturing industry took a gut punch but is now flexing its muscles again.<\/strong> Meanwhile, the real estate market is navigating choppy waters, and guess what? The service industry, once the poster child of post-COVID expansion, is now tapping the brakes and flirting with contraction territory. What does this mean for the Fed and interest rates?<\/strong> Could a slowdown be looming on the horizon? Hold onto your hats, folks, because the economic tide might just be shifting.<\/p>\n <\/p>\n Given the Federal Reserve\u2019s less-than-friendly stance towards the mortgage market, exercising caution is paramount. If you\u2019re considering floating into tomorrow\u2019s statement, keep a close eye on market movements and be ready to lock in rates as needed.<\/em><\/p>\n Feel free to reach out for further discussion or assistance.<\/em><\/p>\n Wednesday\u2019s Federal Reserve announcement takes center stage in the mortgage interest rate arena. While a rate reduction isn\u2019t expected, there\u2019s optimism that the Fed will shed light on their plans to slow the Quantitative Tightening process. Scaling back the amount of money exiting their balance sheet could inject much-needed liquidity into the bond market, exerting downward pressure on mortgage rates.<\/p>\n Recent news reveals a concerning GDP slowdown, dropping from 3.4% in Q4 2023 to 1.6% in Q1 2024. Moreover, consumer inflation is surging beyond healthy levels, raising fears of stagflation\u2014an economic nightmare where inflation spikes amidst slowing growth. This poses a significant threat to the lower and middle class, the bedrock of our economy.<\/p>\n 2024 started with Wall Street forecasting six rate cuts, but odds now favor only one at year\u2019s end\u2014a dramatic reversal. This shift has spurred a notable spike in mortgage rates. The Fed\u2019s inability to meet objectives through higher rates has sparked debate, with some defending rate hikes and others attributing rising wages and economic growth to them. However, the primary culprits could be government deficit spending and record wage increases, leaving consumers with substantial disposable income.<\/p>\n <\/p>\n Mortgage bonds seem to have found a level of reasonable stability the past few trading days. However, we remain in an upward trending rate environment, so floating is a risky choice to make.<\/em><\/p>\n As both home values and mortgage rates continue their upward climb, reaching record highs and levels not seen since last November, the challenge for home buyers to afford their dream homes intensifies.<\/strong> Yet, this trend also signifies a wealth-building opportunity for those who opt for a home within their budget instead of renting.<\/p>\n While buyers can\u2019t turn back time to secure past home prices, they do have the flexibility to potentially lower their mortgage interest rates through refinancing. This dilemma poses a tough choice for many, but those who made purchases in recent years have likely seen a positive impact on their overall net worth. Real estate ownership is a long-term investment, often requiring short-term sacrifices to fulfill our long-term aspirations.<\/strong><\/p>\n The Federal Reserve is facing scrutiny over its forecasting methods, as recent policy decisions have fallen short of expectations. This has led to a reversal of previous statements, as the US economy shows signs of inflation resurgence and unexpected labor market strength.<\/strong> With market expectations shifting towards potential rate hikes instead of cuts, the Fed\u2019s credibility is on the line. To address this, the Fed may shift towards incorporating scenario analysis in its communications, providing more insight but potentially less certainty to the market. This change aims to avoid the confusion caused when the Fed fails to deliver on anticipated moves.<\/p>\n One of the key factors contributing to the recent uptick in consumer inflation is the rising cost of housing.<\/strong> Despite the Federal Reserve\u2019s initial projections that their rate hikes would bring down home values, they underestimated the impact of the historically low rates seen in 2020-2021 on homeowners. Particularly, consider the group of empty nesters who are looking to downsize to a more suitable home. Many of them have discovered that downsizing wouldn\u2019t significantly reduce their mortgage payments, prompting them to hold off until interest rates reach a more favorable level.<\/p>\n Once rates do eventually decrease, we can expect to see a surge in homeowners making the move.<\/strong> This increase in available homes on the market could potentially slow down the rapid appreciation of home values, which would be positive news for the Federal Reserve.<\/p>\n <\/p>\n Amidst the ongoing upward trend in rates since early January, maintaining a locking bias seems prudent. Until this trend reverses, we\u2019ll monitor market developments closely to keep you informed and empowered.<\/em><\/p>\n Exciting news for homebuyers and real estate agents alike! Fannie Mae and Freddie Mac have brought clarity to the confusion surrounding buyer real estate agent commissions. The announcement assures that buyer agent commissions will not eat into the maximum allowed seller contributions on conforming loans. This means homebuyers can breathe a sigh of relief, no longer worrying about scraping together funds for both a down payment and their agent\u2019s commission. Agents, too, can negotiate compensation without adversely affecting buyers\u2014a win-win for everyone involved.<\/p>\n A burgeoning chorus of Wall Street analysts is challenging the conventional wisdom that attributes the unexplained economic boom to Fed rate hikes. This alternative theory suggests that rate hikes might paradoxically fuel economic prosperity by empowering the wealthy, whose stock portfolios reach unprecedented highs and money market accounts yield nearly 5%. With record wage increases and a populace ensconced in low mortgage payments, consumers enjoy unprecedented disposable income, driving up spending and inflation. Could the cure for this economic vibrancy lie in lowering rates? Check out this interesting article:<\/p>\n https:\/\/timesofindia.indiatimes.com\/business\/international-business\/what-if-fed-rate-hikes-are-actually-sparking-us-economic-boom\/articleshow\/109350709.cms<\/p>\n March brought a remarkable surprise in retail sales, with a whopping 0.7% jump\u2014more than doubling consensus expectations of a 0.3% gain. Even after excluding autos and gas, sales surged by 1%, once again surpassing the anticipated 0.4% increase. This unexpected pace of economic growth raises concerns about its sustainability and calls for a more substantial response to curb spending. Perhaps a combination of higher taxes and reduced government spending could help rein in disposable incomes and stabilize the economy.<\/p>\n <\/p>\n There remains little hope of any meaningful fall for mortgage interest rates. We will maintain a locking bias.<\/em><\/p>\n The latest Bureau of Labor Statistics report dropped a bombshell on the economy, with a whopping 303,000 new jobs added in March alone!<\/strong> But that’s not all\u2014unemployment rates took an unexpected dip to 3.8%, sending ripples through the market. Plus, hourly earnings are on the rise, throwing a curveball at hopes for a rate cut from the Fed.<\/strong> Buckle up, folks\u2014looks like May and June\u2019s meetings could bring further disappointment to mortgage rates.\u00a0<\/span><\/p>\n Hold onto your hats, because it seems the Fed’s rate cut plans might be hitting a snag. With inflationary pressures on the rise, some Fed members are even hinting at the possibility of now rate cuts in 2024 at all!<\/strong> Cue the panic in the bond market as planned expectations for rate cuts in 2024 go out the window. And you guessed it\u2014mortgage rates are feeling the heat, climbing higher and higher.\u00a0<\/span><\/strong><\/p>\n \u00a0<\/span>Ever wondered what fuels inflation? Look no further than the age-old tale of too many dollars chasing too few goods. With income levels soaring and homeowners enjoying low mortgage payments, disposable incomes are at an all-time high<\/strong>\u2014cue the surge in demand for consumer goods and services. Brace yourselves, because unless we see a dramatic income slowdown, inflation isn’t going anywhere fast. It’s a rollercoaster ride of rising prices, demanding workers, and unstoppable inflation.\u00a0<\/span><\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" June 3, 2024 I suggest floating, as long as the yield on the 10-Year remains beneath 4.5%. If it does break above this critical threshold, lock. Inflation Stays Steady: A Glimmer of Hope? \ud83c\udf1f Last Friday\u2019s Personal Consumption Expenditures (PCE)…<\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[344,322],"tags":[],"class_list":["post-266318","post","type-post","status-publish","format-standard","hentry","category-mortgage","category-mikes-commentary"],"acf":[],"yoast_head":"\nConsumers Tapped Out: Spending Slows and Savings Stagnate \ud83d\uded1<\/h3>\n
Fed\u2019s New Game Plan: More Treasuries, Lower Rates? \ud83c\udfaf<\/h3>\n
May 20, 2024<\/h2>\n
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<\/p>\nIncrease Taxes or Cut Spending \ud83d\udcc9\ud83d\udcb8<\/h3>\n
Inflation Trends \ud83d\udcca\ud83d\udcb5<\/h3>\n
Treasury Yields and Mortgage Rates \ud83d\udcc9\ud83d\udcca<\/h3>\n
May 13, 2024<\/h2>\n
![\"\"](\"https:\/\/citycreekmortgage.com\/wp-content\/uploads\/2024\/05\/Consumer-debt-mortgage_05_13_2024-222x170.jpg\")
<\/p>\nConsumer Debt Surpasses All-Time Highs \ud83d\udcc8\ud83d\udcb3\ud83d\udcb0<\/h3>\n
CPI Report Impact on Mortgage Rates \ud83d\udcc9\ud83d\udcb2\ud83d\udcca<\/h3>\n
Biden Administration\u2019s Tariff Announcement<\/h3>\n
May 6, 2024<\/h2>\n
![\"\"](\"https:\/\/citycreekmortgage.com\/wp-content\/uploads\/2024\/04\/Fed-Inflation-rate-cuts_05_06_2024-222x170.jpg\")
<\/p>\nJob Report Surprise: Fed’s Rate Cut Hopes Soar\ud83d\udcc9<\/h3>\n
Fed’s Balance Sheet Moves: Surfing the Waves of Liquidity\ud83c\udf0a<\/h3>\n
Recession Whispers: The Tale of a Rolling Economic Tide\ud83c\udf00<\/h3>\n
April 30, 2024<\/h2>\n
![\"\"](\"https:\/\/citycreekmortgage.com\/wp-content\/uploads\/2024\/04\/Fed-mortgage-rates_04_30_2026-222x170.jpg\")
<\/p>\nFederal Reserve Announcement \ud83c\udfe6\ud83d\udcac<\/h3>\n
Economic Insights: GDP Slowdown and Rising Inflation \ud83d\udcc9\ud83d\udcc8\ud83d\udcb0<\/h3>\n
Shift in Rate Cut Expectations and Market Impact \ud83d\udd04\ud83d\udcb2<\/h3>\n
April 22, 2024<\/h2>\n
![\"\"](\"https:\/\/citycreekmortgage.com\/wp-content\/uploads\/2024\/04\/home-values-mortgage-rates_04_22_2024-222x170.jpg\")
<\/p>\nRiding the Rollercoaster of Home Values and Mortgage Rates \ud83c\udfa2<\/h3>\n
The Fed\u2019s Forecast Fiasco: A Tale of Missed Marks \ud83c\udfa9<\/h3>\n
The Great Downsizing Dilemma: Homeowners Hold Tight\u00a0<\/span><\/h3>\n
April 16, 2024<\/h2>\n
![\"\"](\"https:\/\/citycreekmortgage.com\/wp-content\/uploads\/2024\/04\/Fannie-Mae-Freddie-Mac-commissions_04_16_2024-222x170.jpg\")
<\/p>\nClarification on Buyer Agent Commissions \ud83c\udfe0\ud83d\udcbc\ud83d\udca1<\/h3>\n
Unconventional Theory on Fed Rate Hikes \ud83d\udcc8\ud83e\udd14\ud83d\udcb8<\/h3>\n
Surprising Retail Sales Surge \ud83d\udecd\ufe0f\ud83d\udcc8\ud83d\udcb3<\/h3>\n
April 08, 2024<\/h2>\n
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<\/p>\nJobs Report Delivers Shockwaves \ud83d\udca5<\/h3>\n
Rate Cut Dreams Dashed \ud83d\udeab<\/h3>\n
Inflation Blues: The Vicious Cycle Continues \ud83d\udd04<\/h3>\n